Darling International (DAR) Marked As A Barbarian At The Gate

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Darling International ( DAR) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Darling International as such a stock due to the following factors:

  • DAR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.8 million.
  • DAR has traded 1.2 million shares today.
  • DAR traded in a range 306% of the normal price range with a price range of $0.93.
  • DAR traded above its daily resistance level (quality: 33 days, meaning that the stock is crossing a resistance level set by the last 33 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on DAR:

Darling International Inc. provides rendering, used cooking oil, and bakery residual recycling and recovery solutions to the food industry. The company operates in two segments, Rendering and Bakery. DAR has a PE ratio of 20.5. Currently there are 3 analysts that rate Darling International a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Darling International has been 2.2 million shares per day over the past 30 days. Darling International has a market cap of $2.4 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.69 and a short float of 3% with 3.26 days to cover. Shares are down 2.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Darling International as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • DAR's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
  • DAR, with its decline in revenue, slightly underperformed the industry average of 0.6%. Since the same quarter one year prior, revenues slightly dropped by 6.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Net operating cash flow has decreased to $39.53 million or 28.93% when compared to the same quarter last year. Despite a decrease in cash flow DARLING INTERNATIONAL INC is still fairing well by exceeding its industry average cash flow growth rate of -45.27%.

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